New York's attorney general warns CLARITY Act would weaken fraud fight

A bill named after the word "clarity" is, for now, mostly generating disputes over who gets to keep order. On Monday, July 27, New York Attorney General Letitia James submitted written testimony to the US Senate opposing the CLARITY Act, the flagship crypto market-structure bill — arguing that, as written, it would cut states out of fraud enforcement just as scam losses hit record highs.

“Despite this, CLARITY would neuter state and local law enforcement by preempting states and preventing them from fully prosecuting rampant fraud and violations of law by actors in the cryptocurrency marketplace.”

— Letitia James, New York Attorney General

Quote source: crypto.news, July 28, 2026.

• Crypto scam complaints to James's office have nearly tripled over three years.
• Reported losses top $500 million over five years.
• State and local authorities make 98.8% of crypto fraud arrests nationwide — not federal agencies.
• In April 2026, James's office recovered over $5 million for victims from the Uphold platform.

CLARITY's backers have a counterargument: crypto firms currently have to navigate up to fifty different state rulebooks at once, and a single federal standard is meant to fix exactly that patchwork. We broke down a similar split when we rounded up senators' own positions on the bill — from Lummis's "starting gun" to Warren's "industry-written bill" — so whose version of order wins was already contested before James's letter landed.

The scale of the problem behind James's letter reaches well past New York: FBI data puts 2025 crypto fraud losses at $11.4 billion nationwide, up 22% year over year, while illicit crypto volume hit roughly $158 billion, according to TRM Labs — up 145% since 2024. Similar preemption concerns have already come from the North American Securities Administrators Association and the National Sheriffs' Association, so James isn't a lone voice here.

The bill could still reach a vote this year. The real question is whether states keep the power to protect their own residents, or whether that becomes one more line item traded away at the last minute — the way Trump's ethics carve-out already was.

None of this should be read as personalized investment advice.